June 2012 | How-To | Ten Tips

Keeping Shipping Costs in Check

Tags: Transportation Management

With fuel costs continually rising, and consumers demanding faster delivery—preferably for free—it is more important than ever for companies to control their shipping costs. John Haber, founder and CEO of consulting firm Spend Management Experts, offers these tips for managing freight costs.

1. Carefully analyze your current carrier base. Be sure to take into account all potential providers. If you send a significant number of business-to-consumer shipments, other carriers may offer alternate services to the major expediters and the U.S. Postal Service (USPS).

2. Understand your unique shipping profile. Being able to coherently discuss your shipments' characteristics—such as weight, zones, and product mix—gives you more negotiating power.

3. Consider hybrid shipping services. Because they use USPS for last-mile delivery, hybrid shipping services enable you to reduce or avoid costly delivery and fuel surcharges. Overall, hybrid freight costs are lower, and many companies offer the same transit times as UPS and FedEx shipments.

4. Consolidate your carrier data into one central location. This allows easier data access for making informed decisions, assists with management reporting, and can provide more comprehensive audit controls.

5. Push back on annual rate increases. Rates have increased twice in a single year for several transportation modes. Don't simply accept higher rates from your carriers—ask for something in return.

6. Create solid contingency plans. In 2011, supply chains were devastated by natural disasters and extreme weather. Make sure you have a tree of suppliers; you can never have too many branches.

7. Prevent switching barriers. Carriers provide subsidies for consulting and technology to create switching barriers. It's important to have platforms that support a multi-carrier environment. Ensure your logistics systems are open and capable of supporting multiple carriers so you can easily switch from one to another.

8. Pay only what you contractually owe. With skilled personnel and thorough audit processes in place, you can monitor service levels for potential refunds due to poor service.

9. Understand time-in-transit differences between services. Why pay more for an expensive airfreight delivery that arrives at the same time as a low-cost overnight ground shipment? Companies that make this mistake contribute to millions of dollars in overspending annually.

10. Reduce payment cycles. Because many organizations are extending payment terms, carriers may be willing to provide discounts for prompt electronic payments. At today's interest rates, the float from extending payment terms from 15 days to 30, for example, may not be worthwhile.